US MARKET WRAP – Geopolitical tensions keep a lid on stocks as May outlines new approach to Brexit

US equity markets closed flat after trading in a narrow range throughout the day as markets digest the latest toing and froing from North Korean Supreme Leader Kim and US Supreme Leader Trump. Kim called his US counterpart a “dotard” as the foreign minister threatened to launch a hydrogen bomb over the pacific ocean. The increased tension have led some to expect a missile test as soon as this weekend, although there have been no reports of North Korea moving equipment, which generally occurs before any missile test. The geopolitical tensions kept a lid on stock markets although health insurers benefitted after Republican Senator McCain said he could not support the latest healthcare bill. The S&P 500 closed flat at 2501.74, the NASDAQ 100 closed flat at 5932, and the DJIA closed down 0.1% at 22344.26.

In FX markets, GBP weakened after the UK PM May delivered a much-hyped speech on Brexit. In the speech the Prime Minister called for a transitional period after Brexit, confirmed the UK would be leaving the single market and customs union, and reiterated the no deal was better than a bad deal. The response from the EU was generally positive but the speech continued to lack detail and the bloc will be looking for more details when negotiations resume on Monday. In terms of data releases, lukewarm Canadian inflation and retail sales saw the CAD soften, with USD/CAD briefly regaining 1.2350.

WTI and Brent crude futures settled marginally higher after the JMMC meeting of OPEC and non-OPEC oil producers. The committee finished that meeting without any recommendations on extending the cuts but the overall the picture was largely positive and the door has been left open for an extension in November.